Are Reverse Mortgages on the Up and Up?
Here we cover the best advice for people who are thinking of taking out a reverse mortgage.
Anyone that listens to the radio or watches television has probably heard of a reverse mortgage. Of those who have heard of this type of loan, most have negative connotations attached to the phrase. While it is true that a reverse mortgage can have negative implications on homeowners, borrowers whom look ahead to the future repayment of their loans find that they have made a decision that ads both convenience and accessibility to their homes equity.
The Best Candidate for a Reverse Mortgage
The reverse mortgage, also referred to as a Home Equity Conversion Mortgage (HECM), is geared towards home owners whose home is fully paid off, or close to it. Both homeowners must be at least 62 years old and occupy the property for the duration of the loan. Repayment on the loan is not required until the last borrower dies or moves out of the house. Allowing the use of the homeowners built up equity allows for financial freedom during their later years in life. Such flexibility makes the reverse mortgage a palatable option for seniors who have previously been unable to afford necessary repairs to their homes or other important expenses, such as long term care or medical bills.
Looking Ahead to Decide if an HECM is Right for You
If the homeowner’s intention is to will their property to their children, then an HECM would not be a wise choice. This is because repayment terms will commence upon the death of the borrowers, and interest will accrue until the loan is paid in full. Any heirs to the property will then have just one year to pay up, or the mortgage company will sell the house in order to repay the loan. Homeowners considering a reverse mortgage should be sure to consult their attorney or financial adviser in regard to any future financial or legal implications that such a mortgage will have on the heirs of their home.
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